Indian Subsidiary Registration Archives

RBI Rules for Foreign Subsidiary Companies in India The Reserve Bank of India (RBI) has certain rules for foreign companies operating in India or Indian companies with foreign investors. These rules ensure smooth business operations while following Foreign Exchange Management Act (FEMA) and Foreign Direct Investment (FDI) guidelines. Compliance requirements for subsidiary Companies 1. Foreign Direct Investment (FDI) Rules Foreign investment in Indian companies is allowed under two routes: Automatic Route : No prior approval needed. Government Route : Needs approval from the government. Different business sectors have limits on how much foreign investment is allowed. 2. Reporting Requirements (Important Forms to be Filed) Foreign subsidiaries and Indian companies with foreign investments must file specific reports with RBI: FC-GPR (Foreign Currency-Gross Provisional Return) : If a company issues shares to a foreign investor, it must report this to RBI within 30 days. FC-TRS (Foreign Currency-Transfer of Shares) : When an Indian resident transfers shares of a foreign subsidiary to a non-resident (or vice versa), this form must be submitted within 60 days. FLA Return (Foreign Liabilities and Assets Return) : If an Indian company receives foreign investment, it must submit details of its foreign assets and liabilities to RBI by July 15 every year. ECB (External Commercial Borrowings) Reporting : If the company takes a loan from outside India, it must follow RBI’s ECB rules and report the details. 3. Share Pricing Rules When shares are bought or sold between residents and non-residents, they must follow fair market valuation rules. The price of shares must be determined by a certified professional like a chartered accountant or SEBI-registered merchant banker. 4. Sending Money (Profits, Dividends) Outside India Foreign companies in India can send their profits back to their parent company, but they must follow tax laws and FEMA regulations. If they make any payments to their parent company or related businesses abroad, they must follow transfer pricing rules to prevent unfair pricing. We help businesses to open Indian subsidiary and ensure compliance by assisting with filing FC-GPR form for foreign investments, simplifying your expansion into India. 5. Rules for Indian Companies Investing in Foreign Subsidiaries (ODI Rules) If an Indian company owns a foreign subsidiary, it must: Report all investments and money transfers to RBI. Keep proper records of all foreign transactions. 6. Tax and Foreign Exchange Rules Foreign subsidiaries must follow Indian tax laws, including: Income tax on profits. GST (if applicable). Transfer pricing rules to ensure fair pricing in international transactions. FEMA rules ensure that foreign currency transactions are legal and correctly recorded. 7. KYC (Know Your Customer) Compliance Before any foreign investor can send or receive money, banks require KYC documents for verification. This helps prevent fraud and ensures transparency. 8. Corporate Governance & Audits Foreign subsidiaries must follow Indian company laws, which require: Proper corporate governance (ethical business practices). Annual audits of financial statements. Regular filings with the Ministry of Corporate Affairs (MCA). Conclusion Foreign companies and Indian businesses with foreign investors must follow RBI rules for subsidiary companies to avoid penalties or legal issues. These rules help maintain financial transparency and ensure compliance with India’s foreign exchange laws. Suggested Read : What is CIN Number of Company? Branch Office and Indian Subsidiary Holding and Subsidiary Company in India How to start a Subsidiary Company in India? Foreign Subsidiary Company Compliance in India FAQ Foreign companies can open a subsidiary in India under the Foreign Exchange Management Act (FEMA), 1999. The investment must follow Foreign Direct Investment (FDI) rules, and the subsidiary must be registered under the Companies Act, 2013.It depends on the sector. Some sectors allow 100% FDI automatically, while others need government approval. Restricted sectors like defense, telecom, insurance, and multi-brand retail have specific limits and approval rules.No, RBI approval is not needed if the subsidiary follows FEMA rules. The company must pay all required taxes and report the transaction through an Authorized Dealer (AD) Bank.A foreign subsidiary in India must comply with MCA filings, FEMA regulations (FDI reporting via FC-GPR and FC-TRS), income tax and GST filings, and transfer pricing rules for cross-border transactions. Non-compliance can lead to penalties and regulatory scrutiny.Yes, it can take loans from Indian banks. But if borrowing from foreign sources (External Commercial Borrowings – ECBs), it must follow RBI’s rules on how the money can be used, interest rates, and repayment time.

Indian Subsidiary Registration

RBI Rules for Foreign Subsidiary Companies in India

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Indian Subsidiary & Documents required for Indian Subsidiary Registration